Report and Financial Statements Adactus Housing Group Limited For the year ended 31 March 2015
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Company information Registration number:
29433R
Registered office:
Turner House 56 King Street Leigh Lancashire WN7 4LJ
Board members:
P. Joyce (chair) A. Cain P. Chisnell (executive member) E. Clivery R. Davies S. Fussey (co-opted Mar 2015; resigned Aug 2015) L. Garsden (co-opted Jun 2015) T. Jenkins S. Klass (co-opted Nov 2014) P. Lees (executive member) E. Mellor (appointed Sep 2014) H. Roberts (executive member)
Senior Management Team:
P. Lees Group Chief Executive P. Chisnell Group Director of Finance B. Moran Group Director of Corporate Services/Company Secretary H. Roberts Group Director of Development/Deputy Chief Executive
Secretary:
B. Moran Group Director of Corporate Services/Company Secretary
Bankers:
National Westminster Bank Plc Manchester City Centre Branch PO Box 305 Spring Gardens Manchester M60 2DB
Auditors:
KPMG LLP (UK) 1 St Peters Square Manchester M2 3AE
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Table of contents Chair’s statement
Operating and financial review Business and financial review
1 2
3
4
4
Value for money statement
12
New housing development
14 18
Tenancy services Housing assets Community investment
Report of the board
Independent auditor's report
Financial statements Group income and expenditure account
3 4 5
21 25
28
31
32
32
Association income and expenditure account
33
Statement of total recognised surpluses and deficits
34
Reconciliation of movements in Group's and Association's funds
34
Group balance sheet
35
Association balance sheet
36
Group cash-flow statement
37
Notes to the financial statements
38
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Chair’s statement On behalf of the board, I am very pleased to introduce the Group’s Report and Financial Statements for the year to 31 March 2015. As this document clearly demonstrates, the Group’s operating results continue to place it amongst the housing association sector’s ‘best-in-class’. Operating costs remain low, whilst surplus generation, tenant satisfaction and the numbers of new housing produced all remain high. Our focus continues to be placed on the core strategic objective of providing new affordable housing and in support of this, the Group has worked extremely hard during the year to maximise available financial resources. This has included maximising both internal sources of finance (through cost control and the generation of surplus), and available external sources (through grant funding and loan finance). Looking internally, it is particularly pleasing to note that operating costs actually decreased year-on-year. The Group’s operating surplus increased to 39% of turnover during the year (2014: 37%), helping to lead to a retained surplus of £18.4m (2014: £13.3m). All surpluses are of course ploughed back into the business. Looking externally, it is notable that the Group secured the sixth largest allocation of Homes and Communities Agency grant funding in 2014 and also finalised new finance arrangements with Legal & General, Affordable Housing Finance and Santander. The Legal & General finance is secured on both existing assets and on assets yet to be built which evidences both our commitment to ‘sweat our assets’ and also the confidence our partners at L&G have in the Group’s board and executive.
I am pleased to report that having analysed the impact of the rent cuts, the Group’s board members are of the view that the Group’s surplus will be able to ‘take the strain’ and our development plans remain largely unaffected. I should stress that this happy conclusion would not have been likely without the accumulation of past effort to run the business on an economic and efficient basis for which I thank the Group’s staff, executive and my fellow board members. I would like to take this opportunity in particular to put on record my thanks to Su Holland and Tom Jenkins, both of whom will be retiring at this year’s annual general meeting following a long and fruitful relationship with the Group. Clearly, the need to run a tight ship will continue into the medium-term as stormy waters are likely to remain the dominant feature of our operating environment for some time to come. Whilst we are currently in a healthy position, this is certainly no time for complacency and we must continue to strive to do things better and more cost effectively. I have every confidence that our staff, executive and board will find success in continuing to seek out new ways to improve the business in the coming year.
Paul Joyce Chair
As a result of this work, I am confident that we have in place a solid foundation for the delivery of one of the sector’s largest new build programmes for affordable rent over the coming years. Last year in his Chair’s statement, my predecessor Alan Cain commented that in addition to supporting development, healthy financial surpluses would be needed to protect the organisation from emerging risks. These comments now appear to be rather prescient given the July 2015 announcement by the government of annual cuts in housing association rents for the next four years. This announcement is of such import that it warrants some commentary here.
Winners: Achieving Best Value for Money Judges comment: “Very good system in challenging circumstances, demonstrating a comprehensive approach to value for money in all activities. This has enabled them to successfully meet their corporate objectives.” P a g e |3
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Operating and financial review Business and financial review
Principal activities
Adactus Housing Group Ltd (AHG, the non-charitable Parent).
The members of the Adactus group structure (the Group) build, renovate and manage affordable housing for rent and sale and work to help regenerate neighbourhoods. The Group's principal subsidiaries are housing associations, legally known as Registered Providers, and regulated by the regulation committee of the Homes and Communities Agency.
Adactus Housing Association Ltd (AHA, charitable).
The Adactus Housing Group was formed in August 2002 although founder member, Adactus Housing Association Ltd.’s corporate origin was in 1964. The Group's main offices are in Leigh, Chorley and Manchester.
Beech Housing Association Ltd (BHA, non-charitable). Chorley Community Housing Ltd (CCH, charitable). Together the Adactus Housing Group owns and manages 13,216 homes across 21 local authority areas in the NorthWest of England and employs close to 600 staff (518 fulltime equivalents). The Group is the 80th largest manager of housing association accommodation in England1. Figure 2 highlights the geographic spread of properties managed by the Group.
The major organisations in the Group are four independent Co-operative and Community Benefit Societies: Figure 1: The Adactus Group Structure
For more information: http://www.adactushousing.co.uk 1 As measured by turnover. Source: HCA Global Accounts 2013/143 subsidiary performance consolidated to Group level where applicable.
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Figure 2: Location of stock in management
For more information: http://www.adactushousing.co.uk
Objectives and strategy The members of the Adactus Housing Group share similar objects within their company rules which state that the Group’s members will: “Carry on for the benefit of the community the business of providing housing, accommodation, and assistance to help house people and associated facilities and amenities”
“To build, acquire and manage safe, warm and affordable housing predominately for those who are unable to pay market rates.” “To respond effectively to the demands of our customers.” “To make a difference in neighbourhoods by levering in resources and helping to focus community activity.”
This is the basis of the Group’s corporate mission shown here:
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
The Group’s long-term vision is framed by efforts to achieve Quality, Expansion and Diversity (QED) through its activities.
For example, quality is raised through an appreciation of the diversity of customer needs and through effective investment of the efficiency savings afforded by expansion.
Figure 3 highlights how each aspect of the Group’s vision is interlinked.
Figure 3: Quality, Expansion and Diversity
The vision of QED provides the framework for the Group’s strategic objectives: Figure 4: Strategic objectives linked to QED
Objective
Quality
Q1. Maintain effective governance Q2. Provide value for money customer services
Expansion
E1. Increase the size of the business through new group members, transfer or development
Diversity
D1. Provide targeted neighbourhood investment D2. Reduce carbon emissions
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Performance highlights
Operating costs per unit decreased to £2,633 from £2,675 in 2014.
The board is pleased to report a retained surplus in the year of £18.4m (2014: £13.3.m). Operating surplus has increased by two percentage points to 39% of turnover.
A summary of the Group’s recent financial results are as follows:
Figure 5: Five-year financial performance Turnover £’000
Operating costs £’000
Operating surplus
Retained surplus/deficit £’000
Retained surplus
2011
44,711
41,672
7%
(2,383)
-5%
2012
50,150
33,379
33%
9,000
18%
2013
53,291
33,824
33%
9,936
19%
2014
55,793
34,894
37%
13,259
24%
2015
59,129
34,799
39%
18,382
31%
Year
Figure 6: KPI performance at 31 March 2015 The board uses a balanced scorecard approach to monitor the delivery of the Group’s strategic objectives across a broad range of Key Performance Indicators (KPIs). In target
Figure 6 presents the scorecard reviewed by board at the end of the financial year. Out of target
Larger rectangle size indicates greater importance of measure. Colour indicates performance within or out of target. Bold numbers indicate performance. P a g e |7
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
The diagram shows that 23 of the Group’s 28 KPIs were within target and four were outside of target at the year end. Of these, three KPI’s were only marginally outside of target. The remaining KPI, the percentage of calls answered within 40 seconds, was significantly outside of its target of 80%.
Overall, the board is extremely pleased with performance. Highlights of the Group’s balance sheet are as follows:
Figure 7: Balance sheet highlights 2015
2014
2013
2012
2011
£’000
£’000
£’000
£’000
£’000
532,693
489,189
478,302
465,633
442,360
(248,231)
(241,102)
(238,506)
(230,357)
(228,788)
5,960
3,024
2,779
4,548
4,471
Investments
12,953
-
-
-
-
Cash at bank and short term deposits
26,257
12,690
7,876
11,872
13,829
Creditors: Amounts falling due within one year
(16,263)
(32,342)
(14,413)
(22,183)
(27,936)
Net current assets / (liabilities)
34,560
(12,382)
713
(41)
(1,954)
Total assets less current liabilities
299,994
225,794
225,79
221,368
200,102
Creditors: Amounts falling due after more than one year
225,061
162,349
182,895
187,652
174,480
Recycled capital grant and disposal proceeds fund
3,381
2,322
2,372
3,050
2,423
Pension liability
2,634
1,764
1,167
314
111
68,918
51,946
39,360
30,353
23,087
Year Fixed assets Housing properties at cost Social housing and other grant Current assets Properties for sale
Capital and reserves
Figure 7 highlights that the Group has increased its asset base by £43m2 in the year which continues its medium term upward trend. All lender financial covenant ratios were met by all Group members throughout the year.
2
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As measured by net growth in housing properties at cost.
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Risks and uncertainties Risks that may prevent the Group achieving its objectives are considered and reviewed annually by the senior management team and the board as part of the corporate planning process. The risks are recorded and assessed in terms of their impact and probability and are reported to board and audit committee quarterly together with
any action taken to manage those risks including assessment of key controls and the outcome of any action. Figure 8 presents an assessment of the Group’s operational risks that could affect the delivery of its strategic objectives.
Figure 8: Risk analysis
The analysis shows that the successful delivery of strategic objective Q2 “Provide value for money customer services” is impacted by the greatest number of risks. It also shows that the key inherent risks facing the business are:
Interest rates rise leading to a breach in covenants. Tenant injury/death due to fire. Tenant injury/death due to gas. Overstretched/stressed staff Inability to retain good staff New building pilot: serious accidents Reduction in supporting people funding
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Figure 8 confirms however that once the Group’s controls are applied to mitigate the likelihood or impact of risks, the assessment of all residual risks fall within the acceptable levels defined in the Group’s Risk Management Strategy.
The Group’s risk map and the controls it has in place to mitigate risks can be explored in further detail on the Group’s website see: www.adactushousing.co.uk and search for ‘risk’.
Capital structure and treasury policy The Group repaid £38.9m during the year in line with agreed debt repayment profiles. £82.9m of loan finance was drawn-down during the year. At the year-end borrowings amounted to £230m (2014: £184m), maturing as follows:
Figure 9: Debt maturity 2015 £’000
2014 £’000
Within one year
1,546
20,240
Between one and two years
1,632
1,552
Between two and five years
16,986
18,353
209,759
144,084
229,923
184,229
After five years
The Group currently borrows from a variety of lenders at both fixed and floating rates of interest. The Group’s Treasury Management Strategy targets the level of fixed rates of interest to be up to 100% of its loan portfolio. At year-end 87% of the Group’s borrowings were at fixed rates between 1.6% and 11.5%. (Further details on the profile of borrowings can be found at note 20 to the Financial Statements). The Group has no exposure to derivative based hedging structures. The Group’s lending agreements require compliance with a number of financial and non-financial covenants. The compliance to such covenants is monitored on a monthly basis and reported to board each quarter. The Group was compliant throughout 2014/15 and remains compliant with all loan covenants.
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At the year end the Group held £26.3m of cash balances (2014: £12.7m). The Group has a clear focus on cash collection and monitors cash-flow forecasts closely and regularly to ensure it has sufficient funds to meet its business objectives, pay liabilities when they fall due and ensure adequate liquidity with respect to emerging risks. With respect to short term liquidity, at the year-end the Group had access to £39.2m of cash balances and investment balances and in excess of £75m of undrawn committed facilities. The Group’s cash and investment funds increased by £26.5m in the year (2014: increased by £4.8m).
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
The Group successfully arranged new finance facilities of over £100m during the year. The Group took advantage of the availability of long-term, low interest finance to refinance £37m of existing debt and also secured c£63m to help provide new affordable housing. Notably new finance deals included a £50m 40 year loan from Legal and General to fund CCH’s development programme of 814 new affordable homes over the next three years. This loan was secured through an innovative arrangement drawing on CCH’s future development pipeline in addition to its existing housing stock.
Statement of compliance In preparing this Operating and Financial Review and Report of the Board, the board has followed the principles set out in the Statement of Recommended Practice: Accounting by Registered Social Housing Providers (SORP).
Future outlook The remainder of this Operating and Financial Review sets out a comprehensive Value for Money Statement which details the Group’s existing strategy and future plans to achieve its corporate objectives.
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Value for money statement
Value for money (VfM) can be defined as the “optimal use of resources to achieve the intended outcomes.”3 For members of the Adactus Housing Group, efforts to achieve VfM are focused on curating a portfolio of productive housing assets and managing them well to deliver the following core organisational objectives:
Q1. Maintain effective governance Q2. Provide value for money customer services E1. Increase the size of the business through new group members, transfer or development D1. Provide targeted neighbourhood investment D2. Reduce carbon emissions
The Group’s approach to achieving value for money is summarised in Figure 10 below.
Figure 10: Delivering value for money4 Objectives Other influences
Q1 maintain effective governance Q2 Provide VfM customer services E1 Increase the size of the business D1 Provide targeted neighbourhood investment D2 Reduce carbon emissions
Outcomes
Processes
Resources
Inputs
Housing assets
Finance / Staffing
Outputs Services/new housing
Economy
Efficiency
Effectiveness
Spending less
Spending well
Spending wisely
New housing development. Tenancy services. Community investment.
Value for money The optimal use of resources to achieve the intended outcomes
key Contributes to the measurement of….
Figure 10 highlights that VfM can be thought of as an ongoing process of optimising the relationship between resources and outcomes. The remainder of this VfM Statement therefore sets out a comprehensive assessment of the use and maintenance of the Group’s key resources – its housing assets – and the achievement of its intended outcomes for new housing development; tenancy services; and community investment.
Figure 11 provides a high-level overview of how resources were used to achieve outcomes during 2014/15.
3
http://www.nao.org.uk/successful-commissioning/general-principles /value-for-money/assessing-value-for-money/ 4 Diagram adapted from http://www.nao.org.uk/successful-commissioning /general-principles/value-for-money/assessing-value-for-money/
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Figure 11: Use of resources to achieve outcomes 2014/15
Figure 11 shows where the Group’s cash came from and how it was spent during the year to 31 March 2015. The diagram illustrates that the business generated a cash surplus in the year. It shows that cash spend in the year was prioritised firstly on ‘New housing development’ (65% of total spend) which includes the payment of most of the Group’s capital and interest costs of loan finance.
Following this, expenditure focused on ‘Housing assets’ (21% of total spend) and then on ‘Tenancy services’ (14% of total spend). Finally, cash spent on ‘Community investment’ comprised under 1% of the total. Each of these outcomes are examined in greater detail on pages 14 to 27.
In order to aid transparency and accessibility, many of the diagrams and tables presented in this statement (along with their underlying data) have been made available as interactive visualisations on the Group’s website and may be explored for further detail. Visit www.adactushousing.co.uk and search for ‘VfM’ to learn more.
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
New housing development In 2014/15 the Group’s members delivered 481 units of affordable housing, as show in Figure 12.
Figure 12: New affordable housing delivered 2014/15
Tenure Rented Shared Ownership
All new housing developments are expected to provide a positive financial return, acting to strengthen the financial position of the Group’s members and helping to refresh their asset portfolios. The economic impact of housing development can be estimated through the National Housing Federation’s CEBR database5.
An estimate of the impact of the Group’s development activity during the year is shown in Figure 13 below and is clearly significant. Almost 1,000 jobs are estimated to have been supported through the Group’s investment in new development in the year. The Group’s provision of new housing generates wider value for society as new housing provides people with better places to live.
Figure 13: Economic impact of housing development 2014/15 Homes provided
Jobs supported
Impact on local economy
481
975
£41.4m Source: Estimates from the NHF CEBR database
5
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See: http://www.housing.org.uk/policy/localism/local-enterprise-partnerships/
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
A recent study examines the relationship between wellbeing and housing6. It suggests that the social impact of good quality housing association accommodation in terms of well-being effects alone can be valued at up to £997 per person housed per year in comparison with other rental alternatives. The social value generated from improving the lives of the 359 adults rehoused into the Group’s new developments in the year is therefore estimated to be in the region of £350k per annum.
Through careful architectural design, the Group’s housing developments also contribute to improvements to the general built environment and towards efforts to reduce carbon emissions. Figure 14 presents a selection of the new housing delivered by the Group’s members in 2014/15.
Figure 14: Good design in new housing 2014/15
Oak Tree House, Lancaster
Lancaster Road, Cockerham
In 2013, the Group took the strategic decision to accelerate its levels of development to deliver 500 homes per annum. In the next three years, this commitment is expected to inject an additional £130m into the north-west economy, support in excess of 1,000 jobs per annum, and provide social value to new tenants of up to £3m per annum. Development activity is supported through cash generated from retained surpluses, from loan finance and from Homes and Communities Agency grants. The Group has worked to make the best of each of these streams:
Long Marsh Lane, Lancaster
Lune Road, Clitheroe
Surplus generation The financial surplus generated by the Group’s members on their turnover from social housing activities is amongst the best in the north-west region. Figure 15 compares the Group to the latest available data for other north-west housing associations and shows that in 2013/14 it continued to generate above-trend levels of surplus on social housing lettings for every pound received by the business.
6
The Social Impact of Housing Providers, Daniel Fujiwara, HACT, 2013
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Figure 15: North-west housing association efficiency – social housing lettings
In 2014/15 the Group’s surplus from social housing lettings improved further, increasing to 39.8% of turnover from 38.3% the previous year and is expected to average 40.0% throughout the Group’s thirty year financial projections.
The Group financed its development commitments of £53m through cash generated from its operations, drawn-down loan finance and grant received from the Homes and Communities Agency. The outstanding loan balances of Group members increased by £44m in the year.
The Group continued work in the year to reduce the cost of building properties. Of particular note is a pilot to test the value for money gains that can be achieved through vertical diversification into construction. 12 months after the pilot commenced, the Adactus Construction project indicates that significant cost savings can be made over traditional procurement practices.
Grant funding Successful bids for grant funding were made to the Homes and Communities Agency in 2013 and in 2014. As a result, all of the Group’s asset-owning members will continue to be active developers in the coming years.
Loan finance
Figure 16 highlights the Groups performance in securing the sixth largest allocation of grant funding in 2014’s HCA Affordable Homes Programme.
The Group remains an attractive proposition to funders. New lines of funding were secured during the year from Legal and General, Affordable Housing Finance and from Santander.
In total, the Group’s current development plans will leverage £32.8m of secured grant funding to deliver 1,526 units by 2018 as shown in Figure 17.
87% of debt is fixed and the Group’s weighted average cost of loan finance is 5.0% (2014: 5.3%).
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Figure 16: Affordable Home Programme 2015-18 top funding allocations (2014)
£
£
Figure 17: Development plans with secured grant to 2018
Tenure Rented Shared Ownership
The Group expects to retain its position within the top ten of Homes and Communities Agency funded developers despite its size as only the 80th largest as measured by turnover7.
New housing development – 2014/15 value for money gains
481 new affordable homes provided. Estimated 975 jobs supported through development work. Estimated £41.4m of value added into the local economy.
Estimated £350k pa of social value generated for tenants of new homes. Invested £53m of cash resources to support new build programme. Leveraged grant of £9m to support development in the year. Reduced loan costs through refinancing. Commenced year two of a pilot to test the viability of creating an in-house building arm. 7 Source: HCA Global Accounts 2013/14 subsidiary performance consolidated to Group level where applicable.
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
v
Tenancy services The Group provides a range of tenancy services to the tenants and leaseholders of its member housing associations. 1,407 properties were re-let in the year. Rent lost due to empty properties remained low at 0.8% (2014: 0.8%). Properties were empty for a median period of 16 days on average compared with 17 days recorded for the previous financial year. The social value generated for tenants from new lettings in the year is estimated to be in excess of £580k8. Tenancy services are generally accessed via the Group’s contact centre which resolves more than 70% of all enquiries ‘right first time’. Over 161,000 customer enquiries were answered in this way during 2014/15. The minority of issues that cannot be dealt with by the call centre (typically complex maintenance issues or anti-social behaviour cases) are allocated to specialist teams of staff. This model is extremely effective with 93% of those customers surveyed in the year stating that they were satisfied with the response to their enquiry9.
The Group’s key metric for customer satisfaction, its Net Promoter Score, remained strong at the year-end, recording a result of 37 (2014: 45). This performance is comparable to some of the nation’s most well-known and respected brands. Figure 18 sets out an analysis of the services requested by customers.
Figure 18: Services requested
Requests for property repairs, help with rent issues, lettings and antisocial behaviour account for eight in ten of all contacts from customers. The Group continues to place a focus on these areas to ensure that its services are effective. Figure 19 shows how the timescale for the delivery of these services has improved in recent years. P a g e | 18
8
See p 27 The Social Impact of Housing Providers, Daniel Fujiwara, HACT, 2013 for methodology. 9 Source: 1,490 replies to automated surveys undertaken during the second half of 2014/15.
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Figure 19: Service delivery
ASB investigation Non-emergency repairs
Speed of service delivery
Re-lets Rent enquiry
The speed of delivery of the anti-social behaviour and lettings services has improved markedly since the Group introduced dedicated teams to solely concentrate on these areas in 2011.
The Group’s service delivery model is also economic. Figure 20 shows the latest available data on how the Group’s costs for tenancy services compare with 58 other north-west housing organisations.
Figure 20: Benchmarking tenancy management costs
Source: Housemark, peer group of 58 north-west housing organisations, 2013/14 data
Taken together, the annual cost of tenancy services is £94 per unit less than the median costs of other north-west housing organisations (2014: £59 lower).
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Conversely, the Group’s costs for rent arrears & collection and for resident involvement services are relatively low. The Group has invested in technological innovations in both of these areas in recent years to improve the VfM of service provision:
The creation of a web-based tenant consultation system to engage with greater numbers of tenants. This has resulted in better and more timely customer intelligence than previously gained through traditional methods of tenant involvement which focused heavily on meetings.
The adoption of software which analyses payment patterns to calculate the amount of rent arrears owed by tenants themselves rather than from Housing Benefit. This has improved the prioritisation of income recovery efforts.
2014/15 saw the first full-year impact of the Group’s efforts to automate all of its early-stage income recovery processes. This has limited the impact of the government’s welfare benefit reforms as shown in Figure 20.
Figure 21: Rent arrears
The key value for money trade-offs that can be made by the Group with regard to the provision of tenancy services are strategic decisions relating to whether services are provided in-house or are out-sourced.
The Group’s medium-term strategy is to maintain and develop its in-house call centre based model for service provision providing that value for money continues to be demonstrated. Increasingly its strategy is to promote selfservice options to customers.
Tenancy services – 2014/15 value for money gains
1,434 lettings were made providing social value of over £580k.
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Introduced new mobile working solution for sheltered and supported staff Procured new out of hours customer contact contract. Automated income recovery processes to court stage. £553k additional income received through affordable rents. Improved options for customer self-service launched.
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Housing assets The Group’s housing assets provide the financial platform for the delivery of its social objectives. The Group’s members own and manage 13,216 properties which generated an income of £59.0m10against costs of management, maintenance and investment of £34.8m11 in 2014/15. In total, the Group’s members have c£284m of capital deployed in their housing assets12 which are expected to generate an average annual return of 7.8% over the next thirty years13. This return has reduced from the previous year’s estimate of 8.7% due to the rent reduction regime recently announced by the government. It remains however comfortably above the Group’s weighted average cost of loan finance of 5.0%, demonstrating that the asset portfolio as a whole generates a worthwhile financial investment. Figure 22: Financial return of housing assets 2014/15
Figure 22 summarises the return on capital employed generated by the Group’s housing asset portfolio in the year to 31 March 2015. General needs
Shared Ownership Other
Source for National average: Global Accounts 2013/14, HCA
Figure 22 shows that the overall return on capital employed of 9.0% out-performs the sector average of 5.3% recorded for 2013/141. It also indicates that return on capital employed is higher for those Group members with proportionally more general needs housing within their stock holdings. The Group’s better than average return on assets is explained by its better than average operating costs. Low costs are partly the result of the Group’s delivery model for tenancy services (see above) but in the main result from
an economic approach to asset management. Figure 23 shows how the Group’s asset management costs compare with other north-west housing associations.
10
Net rent receivable and management income, note 3 to the Financial Statements. 11 Total expenditure on social housing lettings and housing management contracts, note 3 to the Financial Statements. 12 Net of grant received, note 13 to the Financial Statements. 13 Internal Rate of Return before interest costs.
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Figure 23: Benchmarking the cost of asset management
Source: Housemark, peer group of 58 north-west housing organisations, 2013/14 data
In comparison with other north-west based housing associations, Figure 23 demonstrates that the Group’s costs per unit for asset management are below median levels overall and are far below median levels for major works and cyclical maintenance. Taken together, the Group’s costs for asset management are within the top ten percent of its peer group and £1,076 per unit lower than the median costs of other north-west housing organisations (2014: £835 per unit lower). Costs are low primarily because the Group’s maintenance services are almost entirely provided in-house. In-house provision enables the Group to save the profit and VAT elements that would otherwise be paid through external procurement (amounting to an estimated 8% saving on VAT alone).
It also allows major maintenance spend to be targeted to individual properties as-and-when needed which is more difficult to achieve through externally procured contracts that tend to package works together on an area-wide basis. Typically, the Group undertakes major maintenance work in empty properties before new tenancies commence. Of course, investment in improving housing assets remains a relatively high-spend area for the Group with £9m 14invested during the year (2014: £9m). Investment principally took the form of decoration to improve the attractiveness of housing available for let and also the upgrade of property components in order to maintain compliance with regulatory and statutory requirements as shown in Figure 24.
Figure 24: Asset component investment 2014/15
14
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Source: Expenditure on work to existing properties, note 13 to Financial Statements
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
This investment included £1.4m undertaken in the year (2014: £1.2m) to ensure that housing assets continue to meet the changing expectations of customers and remain in demand and productive. Investment focused on improving the street-scape of eight estates with work to improve
fencing, external cladding and off-street parking; the modernisation of six retirement living schemes. Figure 25 presents a selection of the improvements made.
Figure 25: Wider asset investment 2014/15
Springbank Court, Crumpsall
Sandon Lodge, Seaforth
Glenmay Court, Stretford
Sycamore Close, Withington
Data is used to drive decisions about stock investment, disposal or retention. The Group’s strategy is to retain uneconomic housing only in cases where the strategic or social value of retaining those assets is judged to outweigh the financial cost to the business.
This strategy has resulted in an active programme of stock disposals undertaken with the consent of local authority partners. Disposals during the year generated capital receipts of £5.9m15 and a surplus of £1.7m16 and included the sale of seven properties to other housing associations and 52 properties to other buyers as shown in Figure 26. 16
15 Source: Cash flow statement page 37 of the Financial Statements Source: ‘Surplus on sale of fixed assets’, note 6 to the Financial Statements
P a g e | 23
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Figure 26: Stock disposals 2014/15
Company Housing Association Individual
Adactus Housing Association has future plans to dispose of approximately 50 units per annum. Capital receipts will be used in support of its housing development programmes.
Housing assets – 2014/15 value for money gains
P a g e | 24
Growth in asset base value of £34m. Estimated savings of £1.2m through in-house delivery of asset management services. Modernisation of six retirement living schemes at a cost of £744k. Street-scape improvements to eight estate areas at a cost of £654k. Disposal of 59 uneconomic properties generating a capital receipt of £5.9m. Completed extension of head office.
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Community investment In 2014/15 the Group’s members expended £426k (2014: £436k) on initiatives to improve the quality of life of tenants. The social impact of the Group’s community investment activities has been estimated through the Social Value Bank maintained by HACT². This work indicates that every £1 invested by the Group in community investment activities generates a much greater return for society. Figure 27 provides a summary of the projects funded in 2014/15 that delivered the highest social value. Figure 27: Top ten community investment projects 2014/15 Project
Key outcomes
Estimated social value
One Community One Goal
845 participants in football
£2.6m
Urban Youth Hub Clubs
Reduction in anti-social behaviour for 666 people through funding of youth facilities
£2.3m
New Mums Healthy Bodies
Improved health for 96 participants
£1.1m
Rangletts Ramps
150 people with reduced concerns about teenagers through funding of skatepark
£906k
YKids Media Project
72 participants improved their confidence
£426k
Ykids ‘Pay it Forward’
135 participants improved their feeling of belonging to neighbourhood
£399k
Bereavement Service
Relief from depression/anxiety for 67 participants
£386k
Good Neighbour Project
101 participants regularly talking to neighbours
£345k
Levenshulme and Burnage Boxing Academy
Frequent exercise for 100 participants
£300k
Sefton Young Carers
Improved confidence for 42 participants
£288k
Source for social value estimates: Social Value Bank, HACT
The top ten projects generated an estimated £9.1m of social value in the year.
²⁰Title: Community investment values from the Social Value Bank, Authors: HACT and Daniel Fujiwara (www.hact.org.uk / www.simetrica.co.uk), Source: www.socialvaluebank.org, License: Creative Commons AttributionNonCommercial-NoDerivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/deed.en_GB) P a g e | 25
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
The Group’s flagship initiative in this area is the Neighbourhood Fund – a tenant controlled vehicle for providing financial support to community projects.
In 2014/15 240 projects were supported benefiting people throughout the north-west as shown in Figure 28.
Figure 28: Neighbourhood Fund investment 2014/15
Examples on some of the initiatives supported in 2014/15 are provided in Figure 29. Figure 29: Example Neighbourhood Fund projects
New Mums Healthy Bodies
Ykids ‘Pay it Forward’ P a g e | 26
Levenshulme and Burnage Boxing Academy
Urban Youth Hub Clubs
Ykids Media Projet
One Community One Goal
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
The Group’s strategic aim is to invest £1,000,000 in community projects during the three years to 2018. Figure 30 shows the investment planned for 2015/16 and includes new programmes to help fund the recently
established Wigan Youth Zone and also to increase the number of disabled people in employment with the Group through the Supported Employment Programme.
Figure 30: 2014/15 planned community investment Neighbourhood Fund Chorley Hit Squad Supported Employment programme Environmental Improvements Tenant Welfare Fund Wigan Youth Zone Employment and Skills Green Grants Partnership Leverage Community House Skip Days Enterprise Fund Good Neighbour Competition Sustainability Garden Competition £0
£20,000
£40,000
£60,000
£80,000
£100,000
£120,000
£140,000
£160,000
£180,000 £200,000
£300,000
Community investment – 2014/15 value for money gains
240 community projects supported through £192k Neighbourhood Fund spend. Match funding of £322k secured for projects. Top ten projects generated £9.1m of social value. 32 people helped into full-time employment. 4 people helped into part-time employment. 15 people apprentices were employed.
P a g e | 27
3
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Report of the board The board is pleased to present its report together with the audited Financial Statements of Adactus Housing Group Limited (the Association) for the year ended 31 March 2015. The Association is a member of the Adactus Group Structure (the Group), of which Adactus Housing Group Limited is the parent company.
Principal activities, business review and future developments Details of the Group’s principal activities, its performance during the year and factors likely to affect its future development are contained within the Operating and Financial Review which precedes this report.
Board members and executive directors The present board members and those who served throughout the year and executive directors of the Group are set out on page 1. The executive directors are the group chief executive and group directors highlighted on page 1. The senior management team remains unchanged during the year. They hold no interest in the Association's shares and act as executives within the authority delegated by the board. Group insurance policies indemnify board members and officers against liability when acting for the Group and Association.
Service contracts The group chief executive is appointed on an employment contract with 12 months’ notice and the group directors on an employment contract with six months’ notice.
Pensions During the year, all of the executive directors with the exception of the group chief executive were members of the Social Housing Pension Scheme, a defined benefit (final salary) pension scheme. They participated in the scheme on the same terms as other eligible staff and each relevant association within the Group contributed to the scheme on behalf of its employees. The group chief executive was not an active member of any pension scheme.
Employees The Group recognizes that the success of the business depends on the quality of its managers and staff. It is the policy of the Group and Association that training, career development and promotion opportunities should be available to all employees. The Group is committed to equal opportunities. Of particular note is its support of disabled people, both in terms of recruitment and also retention of employees who become disabled whilst employed by the Group. The board is aware of its responsibilities on all matters relating to health and safety. The Group has prepared detailed health and safety policies and provides staff training and education on health and safety matters.
Donations During the year, the Group made no political donations. Any charitable contributions are made within the Group's normal activities.
Financial risk management objectives and policies The Group uses various financial instruments including loans and cash and other items such as rent arrears and trade creditors that derive directly from its operations. The main purpose of these financial instruments is to raise finance for the delivery of the Group’s objectives. The existence of these financial instruments exposes the Group to a number of financial risks. The main risks arising from the Group’s financial instruments are considered by board to be interest rate risk, liquidity risk and credit risk. The board as part of the overall Risk Management Strategy and Treasury Management Strategy reviews and agrees policies for managing each of these risks as summarised below.
Interest rate risk The Group finances its operations through retained surpluses and bank borrowings. exposure to interest rate fluctuations on its managed by the use of both fixed and facilities.
a mixture of The Group’s borrowings is variable rate
Other benefits
Liquidity risk
The executive directors are entitled to other benefits such as the provision of a car (or car allowance) and health care insurance
The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and invest cash assets safely and wisely.
P a g e | 28
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Credit risk
The Group’s principal credit risk relates to tenant rent arrears. This risk is managed by robust recovery procedures, providing support to existing tenants where necessary and the pre-let screening of applicants for tenancies. The Group’s financial inclusion service provides the necessary support to tenants and the Group’s arrears recovery team closely monitors tenant arrears as a whole. The implementation of an automated arrears recovery process ensures that arrears levels are minimized reducing the credit risk.
The introduction of Universal Credit has been identified as a key risk to the Group and therefore the Group has made a prudent assumption in relation to bad debts in its financial plan and forward budget, to ensure the impact of this risk is more than covered by the financial results of the organisation as a whole.
Going Concern The board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, being a period of twelve months after the date on which the report and Financial Statements are signed. The annual update of the financial and business plan coupled with the available loan facilities in place gives the board reasonable assurance to continue to adopt the going concern basis in the Financial Statements.
Internal Controls Assurance
The board acknowledges its overall responsibility for establishing and maintaining the whole system of internal control and for reviewing its effectiveness. The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve business objectives, and to provide reasonable assurance against material misstatement or loss. The process for identifying, evaluating and managing the significant risks faced by the Group is on-going and has been in place throughout the period commencing 1 April 2014 up to the date of approval of the report and Financial Statements. Key elements of the control framework include:
Formal policies and procedures are in place, including the documentation of key processes and rules for the delegation of authorities. These policies and procedures are reviewed on an agreed cycle. Experienced and suitably qualified staffare responsible for important business functions.
A performance management framework is in place to provide monitoring information to the board and management. Employee progress against agreed, documented objectives is formally reviewed. Management report regularly on risks and how these are managed. Forecasts and budgets are prepared which allow the board and management to monitor financial objectives and risks. Monthly management accounts are prepared promptly with significant variances from budget investigated and accounted for. This reporting includes the monitoring of all loan covenants. All significant new initiatives and projects are subject to formal appraisal and authorization procedures by the appropriate board. The governance committee receives quarterly reports on board appraisal, recruitment and succession. An internal audit service is provided by the Group incorporating a team managed by a qualified, fulltime employed audit manager. The audit committee approves the audit programme and reviews internal audit reports, reports from management and thirdparty reviews including reports from tenant scrutiny. The audit committee makes quarterly reports to the board and reviews the assurance procedures, ensuring that an appropriate range of techniques are used to obtain the level of assurance required by the board. The audit committee reviews and approves this statement of the Group and Association's internal controls assurance. Risks are identified, assessed and documented in a risk register with details of how each risk will be managed. The risk register is completed with the approval of the board. Internal audit independently reviews the risk identification procedures and control process implemented by management and reports to the audit committee. The group chief executive also reports to the board on behalf of the senior management team on significant changes in the business and external environment which affect significant risks. The board receives quarterly information on the financial performance together with a summary of key performance indicators covering the main business risks. A fraud register is maintained by the group company secretary and all significant frauds are reported to the audit committee. No significant frauds were reported during 2014/15.
Adactus Housing Group has two unregulated subsidiaries, which traded in the year, Palatine Contracts Limited and Acuna Limited. Although not registered providers and not regulated by the Homes and Communities Agency they are both managed and monitored under the same internal control framework as outlined above, specifically:
P a g e | 29
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Directors of the boards include current board members of Adactus Housing Group. The Group’s standard policies/procedures and financial regulations have been adopted into all unregulated subsidiaries. All unregulated subsidiaries are subject to the same financial and internal control scrutiny by both the Group’s internal and external audit functions. The Group’s audit committee carries out an annual scrutiny of the unregulated subsidiaries Financial Statements. There is no detrimental financial risk to the Group should these two unregulated subsidiaries cease operations at any point as the assets exceed the likely debt.
NHF Code of Governance During the year the Group’s compliance with the NHF Code of Governance was subject to internal audit. The board is pleased to report full compliance with the code.
Statement of responsibilities of the board for the report and Financial Statements The Board is responsible for preparing the Board’s Report and the financial statements in accordance with applicable law and regulations. Co-operative and Community Benefit Society law requires the Board to prepare financial statements for each financial year. Under those regulations the Board have elected to prepare the financial statements in accordance with UK Accounting Standards.
The Board is responsible for keeping proper books of account that disclose with reasonable accuracy at any time the financial position of the association and enable them to ensure that its financial statements comply with the Cooperative and Community Benefit Societies Act 2014, the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing 2012. The Board has general responsibility for taking such steps as are reasonably open to it to safeguard the assets of the association and to prevent and detect fraud and other irregularities. The Board is responsible for the maintenance and integrity of the corporate and financial information included on the association’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
External auditors In accordance with the Co-operative and Community Benefit Societies Act 2014, a resolution to appoint KPMG LLP (UK) as external auditors will be proposed at the annual general meeting.
AGM The annual general meeting will be held on 21 st September 2015 at The Lowry Hotel, 50 Dearmans Place, Chapel Wharf, Salford, M35 LH. Approved by the board on 21st September 2015: Signed on their behalf by:
The financial statements are required by law to give a true and fair view of the state of affairs of the group and the association and of the income and expenditure of the group and the association for that period. In preparing these financial statements, the Board is required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards and the Statement of Recommended Practice have been followed, subject to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the association will continue in business.
P a g e | 30
Paul Joyce Chair
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Independent auditor's report to the members of the Adactus Housing Group Limited We have audited the financial statements of Adactus Housing Group Limited for the year ended 31st March 2015 set out on pages 32 to 74. The financial reporting framework that has been applied in their preparation is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice). This report is made solely to the association in accordance with section 128 of the Housing and Regeneration Act 2008 and section 87 of the Co-operative and Community Benefit Societies Act 2014. Our audit work has been undertaken so that we might state to the association those matters we are required to state to it in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the association as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of the board and auditors As more fully explained in the Statement of Board’s Responsibilities set out on page 30, the association’s Board is responsible for the preparation of financial statements which give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
4
have been properly prepared in accordance with the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing 2012.
Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Co-operative and Community Benefit Societies Act 2014 requires us to report to you if, in our opinion:
the association has not kept proper books of account; or
the association has not maintained a satisfactory system of control over transactions; or
the financial statements are not in agreement with the association’s books of account; or
we have not received all the information and explanations we need for our audit.
Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements In our opinion the Financial Statements:
give a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the state of affairs of the group and the association as at 31st March 2015 and of the income and expenditure of the group and the association for the year then ended; comply with the requirements of the Co-operative and Community Benefit Societies Act 2014; and
Hywel Jones for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 1 St Peter’s Square Manchester M2 3AE 24 September 2015
P a g e | 31
5
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Financial statements Group income and expenditure account Note Turnover group and share of joint venture
2015
2014
£’000
£’000
59,129
58,521
-
Less: share of joint venture's turnover Group turnover
3
59,129
(2,728) 55,793
Cost of sales
3
(1,551)
(621)
Operating costs
3
(34,799)
(34,894)
3,9
22,779
20,278
-
536
22,779
20,814
Group operating surplus Share of operating profit in joint venture Total operating surplus Surplus on sale of fixed assets
6
1,702
2,458
Interest receivable and other income
7
3,510
169
-
1,264
(9,951)
(9,857)
-
(1,600)
18,040
13,248
(146)
(3)
-
(45)
17,894
13,200
Share of joint venture interest receivable 8
Interest payable and similar charges Share of joint venture interest payable Surplus on ordinary activities before taxation
12
Taxation on surplus on ordinary activities Share of joint venture taxation Surplus on ordinary activities after taxation Transfer from designated reserves
23
260
13
Transfer from restricted reserves
23
228
46
18,382
13,259
Surplus for the year after reserve transfers
The accompanying notes form part of these Financial Statements
Historical cost surpluses and deficits were identical to those shown within the income and expenditure account.
The Financial Statements were approved by the board on 21st September 2015 and signed on its behalf by:
All amounts relate to continuing activities.
P Joyce: Chair P a g e | 32
P Lees: Executive member
B Moran: Secretary
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Association income and expenditure account
Note Turnover
2015
2014
£’000
£’000
20,960
21,010
(12,469)
(12,054)
(8,516)
(8,969)
(20,985)
(21,023)
(25)
(13)
14
2
(11)
(11)
2
(3)
(9)
(14)
Operating costs Staff costs Administration costs
Total operating deficit Interest receivable Deficit on ordinary activities before taxation Taxation
12
Deficit for the year
Historical cost surpluses and deficits were identical to those shown within the income and expenditure account. All amounts relate to continuing activities.
The Financial Statements were approved by the board on 21st September 2015 and signed on its behalf by:
P Joyce: Chair
P Lees: Executive member
B Moran: Secretary P a g e | 33
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Statement of total recognised surpluses and deficits
Group
Surplus/(deficit) for the year
Actuarial losses on pension schemes Total recognised surpluses/(deficits) relating to the year
Association
£’000
£’000
£’000
£’000
2015
2014
2015
2014
17,894
13,200
(9)
(14)
(922)
(614)
-
-
16,972
12,586
(9)
(14)
Reconciliation of movements in Group’s and Association’s funds Group
Association
£’000
£’000
£’000
£’000
2015
2014
2015
2014
Opening funds
51,946
39,360
(4)
10
Total recognised surpluses/(deficits) relating to the year
16,972
12,586
(9)
(14)
Closing funds/(deficits)
68,918
51,946
(13)
(4)
P a g e | 34
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Group balance sheet 2015 £’000
2014 £’000
532,693
489,189
(248,231)
(241,102)
(28,111)
(25,672)
13
256,351
222,415
14
9,083
8,325
265,434
230,740
Note Fixed assets Housing properties at cost Social housing and other grants Depreciation and impairment Other tangible fixed assets Investment in joint venture Share of gross assets
15
-
24,047
Share of gross liabilities
15
-
(24,024)
265,434
230,763
Current assets Properties for sale
16
5,960
3,024
Investment
17
12,953
-
242
170
5,411
4,076
26,257
12,690
50,823
19,960
(16,263)
(32,342)
34,560
(12,382)
299,994
218,381
Stock 18
Debtors: amounts falling due within one year Cash at bank and short term deposits Creditors: Amounts falling due within one year
19
Net current assets/(liabilities) Total assets less current liabilities Creditors: Amounts falling due after more than one year
19
228,442
164,671
Pension liability
28
2,634
1,764
Called up share capital
22
-
-
Designated reserves
23
2,911
3,171
Restricted reserves
23
642
870
Revenue reserves
23
65,365
47,905
68,918
51,946
299,994
218,381
Capital and reserves
Consolidated funds
The Financial Statements were approved by the board on 21st September 2015 and signed on its behalf by:
P Joyce: Chair
The accompanying notes form part of these Financial Statements
P Lees: Executive member
B Moran: Secretary P a g e | 35
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Association balance sheet
Note
2015 £’000
2014 £’000 Restated
18
392
410
Stock
242
170
Cash at bank and short term deposits
509
1,128
1,143
1,708
(1,156)
(1,712)
Net current liabilities
(13)
(4)
Total assets less current liabilities
(13)
(4)
-
-
Revenue reserves
(13)
(4)
Association's funds
(13)
(4)
(13)
(4)
Current assets Debtors
Creditors: Amounts falling due within one year
19
Capital and reserves Called up share capital
The accompanying notes form part of these Financial Statements
The Financial Statements were approved by the board on 21st September 2015 and signed on its behalf by:
P Joyce: Chair P a g e | 36
P Lees: Executive member
B Moran: Secretary
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Group cash-flow statement
Note
2015 £’000
Net cash inflow from operating activities
25a
2014 £’000
£’000
21,553
£’000 25,644
Returns on investments and servicing of finance Interest received Interest paid
3,403
87
(10,417)
(9,912)
Net cash outflow from returns on investments and servicing of finance
(7,014)
(9,825)
Taxation Corporation tax paid
-
(3) -
Capital expenditure and financial investments Cash paid for construction and purchase of housing properties SHG received Proceeds on sales of housing properties Cash paid for other fixed assets Proceeds on sales of other fixed assets
(46,275)
(16,782)
9,883
3,912
5,912
5,326
(1,719)
(1,633)
162
409
Cash inflow before management of liquid resources and financing Financing Loans received Loans repaid
Increase in cash and investments
25c
(3)
(32,037)
(8,768)
(17,498)
7,048
82,940
-
(38,922)
(2,234) 44,018
(2,234)
26,520
4,814
The accompanying notes form part of these Financial Statements
P a g e | 37
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements
1.
Legal status
The Group is registered under the Co-operative and Community Benefit Societies Act 2014 and is registered with the Homes and Communities Agency as a housing provider.
2.
Principal accounting policies
Basis of accounting The Financial Statements of the Group are prepared in accordance with UK Generally Accepted Accounting Principles (UK GAAP) and the Statement of Recommended Practice: Accounting by Registered Social Housing Providers 2010, and comply with the Accounting Direction for Private Registered Providers of Social Housing 2012.
Going concern The Group’s business activities, its current financial position and factors likely to affect its future development are set out within the Operating and Financial Review. The Group has in place long-term debt facilities which provide adequate resources to finance committed reinvestment and development programmes, along with the Group’s day to day operations. The Group also has a long-term business plan which shows that it is able to service these debt facilities whilst continuing to comply with lenders’ covenants. On this basis, the board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, being a period of twelve months after the date on which the report and Financial Statements are signed. For this reason, it continues to adopt the going concern basis in the Financial Statements.
Basis of consolidation The Group Financial Statements consolidate the accounts of the Association and its subsidiaries as at 31 March using merger accounting. Turnover and revenue recognition Turnover comprises rental income receivable in the year, income from shared ownership first tranche sales, sales of
properties built for sale and other services at the invoiced value (excluding VAT) of goods and services supplied in the year and revenue grants receivable in the year. Rental income is recognised from the point when properties under development reach practical completion or otherwise become available for letting. Income from first tranche sales and sales of properties built for sale is recognised at the point of legal completion of the sale. Revenue grants are receivable when the conditions for receipt of grant funding have been met. Charges for support services are recognised as they fall due under the contractual arrangements with administering authorities.
Deferred taxation The payment of taxation is deferred or accelerated because of timing differences between the treatment of certain items for accounting and taxation purposes. Except as noted below, full provision for deferred taxation is made under the incremental liability method on all timing differences that have arisen, but not reversed by the balance sheet date. In accordance with FRS19, deferred tax is not provided for gains on the sale of non-monetary assets, if the taxable gain will probably be rolled over. Deferred tax is measured at the tax rates which are expected to apply in the periods when the timing differences are expected to reverse, based on tax rates and law enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.
Value Added Tax The Group charges Value Added Tax (VAT) on some of its income and is able to recover part of the VAT it incurs on expenditure. The Financial Statements include VAT to the extent that it is suffered by the Group and not recoverable from HM Revenue and Customs.
Interest payable Interest is capitalised on borrowings to finance developments to the extent that it accrues in respect of the period of development if it represents either interest on borrowings specifically financing the development programme after deduction of interest receivable on social housing grant (SHG) in advance; or interest on borrowings as a whole after deduction of interest on SHG in advance to the extent that they can be deemed to be financing the development programme.
P a g e | 38
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements Other interest payable is charged to the income and expenditure account in the year.
Derivatives The Group has used interest rate swaps to reduce its exposure to future increases in the interest rates on floating rate loans. The notional principal is not reflected in the Group’s balance sheet. Payments made under swaps are accrued over the payment period on a straight-line basis and adjusted against interest payable on the loans.
Housing properties Housing properties are principally properties available for rent and are stated at cost less depreciation. Cost includes the cost of acquiring land and buildings, development costs, interest charges incurred during the development period and expenditure incurred in respect of improvements. Works to existing properties which replace a component that has been treated separately for depreciation purposes, along with those works that result in an increase in net rental income over the lives of the properties, thereby enhancing the economic benefits of the assets, are capitalised as improvements. Shared ownership properties are split proportionally between current and fixed assets based on the element relating to expected first tranche sales. The first tranche proportion is classed as a current asset and related sales proceeds included in turnover and the remaining element is classed as a fixed asset and included in housing properties at cost, less any provisions needed for depreciation or impairment.
SHG is subordinated to the repayment of loans by agreement with the HCA. SHG released on disposal may be repayable but is normally available to be recycled and is credited to a Recycled Capital Grant Fund and included in the balance sheet.
Other grants Other grants are receivable from local authorities and other organisations. Capital grants are utilised to reduce the capital costs of housing properties. Grants in respect of revenue expenditure are credited to the income and expenditure account in the same period as the expenditure to which they relate.
Depreciation of housing properties The Group separately identifies the major components which comprise its housing properties, and charges depreciation, so as to write-down the cost of each component to its estimated residual value, on a straight line basis, over its useful economic life. Major components are treated as separable assets and depreciated over their expected useful economic lives or the lives of the structure to which they relate, if shorter. The following useful lives have been applied to the Group's components: Structure
100 years
Roofs
80 years
Kitchens
20 years
Doors
30 years
Windows
30 years
Donated land
Lifts
25 years
Land donated by local authorities and others is added to the cost at market value of the land at the time of the donation. Where the land is not related to a specific development and is donated by a public body and amount equivalent to the increase in value between market value and cost is added to other grants. Where the donation is from a non-public source, the value of the donation is included as income.
Boilers
15 years
Bathrooms
30 years
Social housing grant Social Housing Grant (SHG) is receivable from the Homes and Communities Agency (the HCA) and formerly from the Housing Corporation and is utilised to reduce the capital costs of housing properties. SHG due from the HCA or received in advance is included as a current asset or liability. SHG received in respect of revenue expenditure is credited to the income and expenditure account in the same period as the expenditure to which it relates.
Freehold land is not depreciated.
Impairment Housing properties, including those with individual components, which are depreciated over a period in excess of 50 years, are subject to impairment reviews annually. Other assets are reviewed for impairment if there is an indication that impairment may have incurred. Where there is evidence of impairment, fixed assets are written down to their recoverable amount being the higher of net realisable value or the value in use to the Group. Any such write down is charged to the income and expenditure account.
P a g e | 39
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements Other tangible fixed assets
Liquid resources
Tangible fixed assets are stated at cost less accumulated depreciation. Freehold land is not depreciated. Depreciation is charged on a straight-line basis over the expected useful economic lives of the assets at the following rates: -
Liquid resources are readily disposable current asset investments. They include some money market deposits, held for more than 24 hours, that can only be withdrawn without penalty on maturity or by giving notice of more than one working day.
Land and buildings cost or the
3.33% per annum on length of the lease
Restricted reserves
Furniture, fixtures and fittings
10% per annum on cost
The Group has a restricted reserve (i.e. for a specific purpose) for major repairs to supported housing properties.
Office & computer equipment
25% per annum on cost
Designated reserves
Motor vehicles
25% per annum on cost
Investment properties In accordance with SSAP19 investment properties held for long term investment are re-valued annually at open market value as at the balance sheet date. The aggregate surplus or deficit arising on re-valuation is transferred to the re-valuation reserve except where a deficit is deemed to represent a permanent diminution in value, in which case it is charged to the income and expenditure account. No depreciation is charged in respect of investment properties.
Properties for sale Shared ownership first tranche sales, completed properties for outright sale and property under construction are valued at the lower of cost and net realisable value. Costs comprise materials, direct labour and direct development overheads. Net realisable value is based on estimated sales price after allowing for all further costs of completion and disposal.
Leased assets Rentals payable under operating leases are charged to the income and expenditure account on a straight line basis over the life of the lease term.
Current asset investments Investments are stated at market value. Changes in market value are taken to the re-valuation reserve.
P a g e | 40
The Group has designated reserves (i.e. reserves earmarked for a particular purpose) for the provision of furniture and equipment, tenants’ welfare, and planned maintenance.
Pension costs The Group participates in three funded multi-employer defined benefit schemes: the Social Housing Pension Scheme (SHPS), Greater Manchester Pension Schemes (GMPF) and Lancashire County Pension Fund (LCPF). For SHPS, it has not been possible to identify the share of the underlying asset and liabilities belonging to the individual participating employers. The income and expenditure charge represents the employer contribution payable to the scheme for the accounting period. For the GMPF and LCPF schemes, assets are measured at fair values. Scheme liabilities are measured on an actuarial basis using the projected unit method and are discounted at appropriate high quality corporate bond rates. The net surplus or deficit adjusted for deferred tax, is presented separately from other net assets on the balance sheet. A net surplus is recognised only to the extent that it is recoverable by the Group. The current service cost and costs from settlements and curtailments are charged against operating surpluses. Past service costs are spread over the period until the benefit increases vest. Interest on the scheme liabilities and the expected return on scheme assets are included net in other finance costs. Actuarial gains and losses are reported in the statement of total recognised gains and losses. The defined benefit schemes were closed to new entrants on 31st December 2009, and from that date the Group operates a defined contribution scheme managed by the Social Housing Pension Scheme (SHPS).
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements
3.
Particulars of turnover, operating costs and operating surplus
Group 2015 Note
Turnover £’000
Cost of sales £’000
Operating costs £’000
Operating surplus £’000
4
50,840
-
(30,583)
20,257
-
-
(2)
(2)
Housing management contracts
6,127
-
(4,010)
2,117
First tranche shared ownership sales
1,845
(1,551)
-
294
Other
317
-
(204)
113
Total
59,129
(1,551)
(34,799)
22,779
Note
Turnover £’000
Cost of sales £’000
Operating costs £’000
Operating surplus £’000
4
48,355
-
(29,845)
18,510
127
-
(79)
48
6,232
-
(4,772)
1,460
674
(621)
-
53
-
-
(11)
(11)
Other
405
-
(187)
218
Total
55,793
(621)
(34,894)
20,278
Social housing lettings Other social housing activities: Supporting people
Group 2014
Social housing lettings Other social housing activities: Supporting people Housing management contracts First tranche shared ownership sales Community and regeneration initiatives
The Association’s income relates to the recharge of services provided to its subsidiaries only, and is classified as other social housing activity. P a g e | 41
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements
4. Income and expenditure from social housing lettings (Group)
General needs £’000
Supported housing & housing for older people
Low cost home ownership
Total 2015 £’000
Total 2014 £’000
£’000
£’000 Rents
36,456
7,153
1,310
44,919
42,652
1,614
2,954
207
4,775
4,400
182
964
-
1,146
1,303
Net rents receivable
38,252
11,071
1,517
50,840
48,355
Turnover from social housing lettings
38,252
11,071
1,517
50,840
48,355
Management
4,862
1,369
325
6,556
6,299
Services
1,841
3,676
234
5,751
5,344
Routine maintenance
5,299
1,110
25
6,434
5,871
Planned maintenance
4,654
858
261
5,773
6,127
Major repairs
682
89
15
786
744
Bad debts
364
53
78
495
521
Property lease charges
310
5
20
335
353
3,094
616
156
3,866
3,623
450
113
24
587
963
Operating costs on social housing lettings
21,556
7,889
1,138
30,583
29,845
Operating surplus on social housing lettings
16,696
3,182
379
20,257
18,510
314
84
142
540
363
Service charges Charges for support services
Property asset depreciation Other costs
Rent losses from voids
P a g e | 42
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements
5.
Accommodation in ownership and management Group At the end of the year, accommodation in ownership and management for each class of accommodation was as follows: 2015 No.
2014 No.
General needs
8,734
8,693
Sheltered
1,613
1,605
Supported
482
458
Shared ownership
721
623
11,550
11,379
1,666
1,664
13,216
13,043
Total owned Accommodation managed but owned by others Total owned and managed
Association The Association had no units in management (2014: nil).
6.
Surplus on sale of fixed assets (Group) 2015 £’000
2014 £’000 Restated
5,182
6,642
Carrying value
(4,150)
(3,978)
Capital grant recycled
(1,240)
(70)
Capital grant written off
2,118
131
Incidental costs
(208)
(267)
1,702
2,458
Proceeds
P a g e | 43
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements
7.
Interest receivable and other income (Group) 2015 £’000
2014 £’000
Bank interest receivable
196
87
Income from investments
3,205
-
109
82
3,510
169
Other finance income (see note 28)
8.
Interest payable and similar charges (Group)
Loans and bank overdrafts Notional interest on RCGF/ DPF (note 21) Interest payable capitalised on housing properties under construction
2015 £’000
2014 £’000
10,597
10,050
15
11
(661)
(204)
9,951
9,857
The weighted average interest rate on borrowings of 5.30% (2014: 5.3%) was used for calculating capitalised interest.
9.
Surplus on ordinary activities before taxation (Group) 2015 £’000
2014 £’000
3,866
3,623
826
796
land and buildings
228
271
other
311
509
audit services
29
44
non audit services
18
24
Is stated after charging: Depreciation on housing properties Depreciation on other tangible fixed assets Operating leases
Auditor’s remuneration for:
P a g e | 44
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements
10.
Directors’ emoluments and Board responsibilities Total 2015 £
Total 2014 £
P Joyce
6,667
3,500
O Baker
5,000
3,500
J Clayton
5,000
1,898
A Cain
8,333
10,000
E Clivery
5,080
4,532
R Davies
4,333
3,500
T Jenkins
3,500
3,573
E Mellor
1,288
-
D Gilkes
2,042
1,898
S Abbas
2,042
1,898
M Babiker Eisa El Bedawi
2,042
1,898
583
4,968
E Abbas
-
1,593
C Dickson
-
1,593
45,910
44,351
2015 £’000
2014 £’000
584
552
174
159
Board member
AHG
AHA
BHA
CCH
Non-executive
A Williams
Executive Directors
chair
chair chair chair
The remuneration paid to the group chief executive and directors within the group was: Emoluments (including pension contributions and benefits in kind) Emoluments (excluding employers pension contributions) paid to the highest paid: The highest paid: group chief executive
The Group provides the option of salary sacrifice as part of their pension scheme offer to all employees. The group chief executive exited from the Group’s pension scheme arrangements on 31 March 2014. Therefore the total emoluments including pension contributions paid to the group chief executive in 2014/15 were £173,583 and in 2013/14 were £176,423, a decrease of 1.6% year-on-year. At 31 March 2015 the group chief executive was a deferred member of the Social Housing Pension Scheme. He was an ordinary deferred member of the pension scheme and no enhanced or special terms applied. The Association did not make any contributions to the Social Housing Pension Scheme, or to an individual pension arrangement, for the group chief executive.
P a g e | 45
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements The full time equivalent number of staff who received emoluments:
2015 No.
2014 no.
£60,001 to £70,000
6
5
£70,001 to £80,000
1
-
£80,001 to £90,000
-
3
£90,001 to £100,000
3
-
£100,001 to £110,000
-
2
£110,001 to £120,000
3
1
£120,001 to £130,000
-
-
£130,001 to £140,000
-
2
£140,001 to £150,000
1
-
£150,001 to £160,000
1
-
£160,001 to £170,000
-
-
£170,001 to £180,000
1
1
11.
Employee information
Average monthly number of employees expressed as full time equivalents.
2015
2014
Association No.
Group No.
Association No.
Group No.
Administration
150
153
160
162
Development
22
22
14
14
220
343
221
346
392
518
395
522
Employee numbers:
Housing, support and care
P a g e | 46
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements Employee cost for the adjacent numbers 2015
2014
Association £’000
Group £’000
Association £’000
Group £’000
10,909
13,772
10,600
13,403
Social security costs
905
1,094
907
1,099
Other pension costs
654
819
547
667
12,468
15,685
12,054
15,169
Employee costs: Wages and salaries
The Association's employee numbers and salary costs include amounts recharged from subsidiary entities.
12.
Taxation on surplus/ (deficit) on ordinary activities Association
Group
2015 £’000
2014 £’000
2015 £’000
2014 £’000
Current year
-
-
116
-
Deferred tax
(2)
3
30
3
(2)
3
146
3
(12)
(11)
18,040
13,248
(2)
(3)
3,788
3,001
Exempt due to charitable status
-
-
(3,662)
(2,999)
Fixed asset differences
-
-
10
37
Expenses/(Income) not deductible/(taxable) for tax purposes
-
2
(45)
(60)
Capital allowances in excess of depreciation
-
-
(8)
(28)
(12)
-
(12)
-
-
-
2
-
14
1
14
51
Adjustments in respect of prior periods
-
-
29
(2)
Total current tax charge
-
-
116
-
Analysis of tax charge in year
Surplus/ (deficit) on ordinary activities before tax Tax on profit on ordinary activities at standard rate of 21% (2014: 23%) Effects of:
Other short term timing differences Gift aid related back Unrelieved tax losses and other deductions arising in the period
P a g e | 47
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements
13.
Tangible fixed assets – housing properties (Group) Completed houses held for letting £’000
Housing properties under construction £’000
Completed shared ownership held for letting £’000
Shared ownership under construction £’000
Total £’000
Cost At 1 April 2014
438,746
6,669
43,079
695
489,189
-
(355)
-
(2,628)
(2,983)
(4)
40,611
4
9,743
50,354
-
588
-
73
661
2,680
-
-
-
2,680
Schemes completed
28,067
(28,067)
6,088
(6,088)
-
Components written off
(1,156)
-
-
-
(1,156)
Property disposals
(6,052)
-
-
-
(6,052)
At 31 March 2015
462,281
19,446
49,171
1,795
532,693
214,632
3,880
21,186
1,404
241,102
-
8,885
-
1,204
10,089
7,622
(7,622)
1,500
(1,500)
-
(2,960)
-
-
-
(2,960)
219,294
5,143
22,686
1,108
248,231
24,935
-
737
-
25,672
Depreciation charge for year
3,866
-
-
-
3,866
Depreciation eliminated on property disposals
(272)
-
-
-
(272)
Depreciation eliminated on component replacements
(1,155)
-
-
-
(1,155)
At 31 March 2015
27,374
-
737
-
28,111
At 31 March 2015
215,613
14,303
25,748
687
256,351
At 31 March 2014
199,179
2,789
21,156
(709)
222,415
Transfer to current assets Additions Interest capitalised Components replaced
Social housing grant At 1 April 2014 Additions Schemes completed Disposals At 31 March 2015 Housing property depreciation and impairment At 1 April 2014
Net book value
P a g e | 48
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements All properties are held on either a freehold or long leasehold basis. The Group is unable to analyse this further except at excessive cost.
Included within fixed assets, rented housing properties, there is a debtor relating to properties leased to Arawak Walton Housing Association of £819,380.
Expenditure on works to existing properties 2015 £’000.
2014 £’000
Improvement works capitalised
2,680
2,123
Amounts charged to the income and expenditure account
6,559
6,871
9,239
8,994
2015 £’000.
2014 £’000
248,231
241,102
248.231
241,102
Social housing grant
Total accumulated social housing grant received/receivable at 31 March: Capital grant
P a g e | 49
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements
14.
Other tangible fixed assets (Group) Land and buildings £’000
Furniture and equipment £’000
Motor vehicles £’000
Total £’000
7,590
5,051
461
13,102
Additions
982
615
123
1,720
Disposals At 31 March 2015
(96)
-
(173)
(269)
8,476
5,666
411
14,553
Depreciation At 1 April 2014
1,774
2,818
185
4,777
Charge for the year
251
475
100
826
Eliminated on disposals
(28)
-
(105)
(133)
1,997
3,293
180
5,470
At 31 March 2015
6,479
2,373
231
9,083
At 31 March 2014
5,816
2,233
276
8,325
Cost or valuation At 1 April 2014
At 31 March 2015 Net book value
15.
Investments (Group)
As at 31 March 2014 the Group (via Adactus Housing Association Limited) held a 33.3% interest in the ordinary share capital of Renaissance Miles Platting Holding Company Limited, a company incorporated in the United Kingdom. Through its wholly owned subsidiary undertaking (Renaissance Miles Platting Limited) Renaissance Miles Platting Holding Company Limited operates a Private Finance Initiative on behalf of Manchester City Council, for the provision of management and maintenance services
and the carrying out of refurbishment to social housing properties, along with the construction of private sector housing, in the Miles Platting area of Manchester. This investment was sold in April 2014 therefore the Association had no interest as at 31 March 2015. Renaissance Miles Platting Holding Company Limited and Renaissance Miles Platting Limited prepare financial statements to 30 June each year. The Group’s interest in the joint ventures was as follows:
2015 £’000.
2014 £’000
Share of gross assets
-
24,047
Share of gross liabilities
-
(24,024)
-
23
P a g e | 50
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements
16.
Properties for sale (Group)
Housing properties Work in progress
17.
2015 £’000
2014 £’000
5,960
2,187
-
837
5,960
3,024
Current asset investment
The investment relates to an amount held on deposit which will be released to the Association on completion of a charging exercise.
18.
Debtors
Group
Association
2015 £’000
2014 £’000
2015 £’000
2014 £’000 Restated
2,457
3,195
-
-
(1,450)
(1,976)
-
-
1,007
1,219
-
-
3,582
452
236
260
11
1,341
11
110
159
13
112
13
29
27
29
27
623
1,024
4
-
5,411
4,076
392
410
Amounts falling due within one year Rent and service charges receivable Less: provision for bad and doubtful debts Prepayments and accrued income Related party debtor Other taxation and social security Deferred tax Other
P a g e | 51
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements
19.
Creditors Group
Association
2015 £’000
2014 £’000
2015 £’000
2014 £’000
1,546
20,240
-
-
279
1,233
104
469
1,828
2,441
-
-
32
-
-
-
501
511
-
-
-
-
315
612
354
448
-
-
Accruals and deferred income
8,110
5,455
737
631
Other
3,613
2,014
-
-
16,263
32,342
1,156
1,712
225,061
162,349
-
-
3,381
2,322
-
-
228,442
164,671
-
-
Amounts falling due within one year Debt (see note 20) Trade creditors Rent and service charges received in advance Deferred tax Social housing grant received in advance Amounts owed to group undertakings Other taxation and social security
Amounts falling due after more than one year Debt (see note 20) Recycled capital grant and disposal proceeds funds (see note 21)
P a g e | 52
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements
20.
Debt (Group)
2015 £’000
2014 £’000
Within one year
1,546
20,240
Between one and two years
1,632
1,552
Between two and five years
13,486
14,853
145,846
132,244
162,510
168,889
-
-
3,500
3,500
In five years or more
63,913
11,840
Less: Issue costs
(3,315)
(1,640)
226,608
182,589
Debt repayable by instalments
In five years or more
Debt not repayable by instalments Within one year Between two and five years
Total debt
Loans from external funders are secured by fixed charges on individual housing properties. Housing loans are repayable with interest chargeable at varying rates 0.6% to 11.5% during the year.
At 31 March 2015 the Group had undrawn borrowing facilities of £75.3m (2014: £43.7m).
P a g e | 53
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements
21.
Recycled capital grant and disposal proceeds funds (Group) RCGF £’000
DPF £’000
2015 Total £’000
2014 Total £’000
At 1 April
2,075
247
2,322
2,394
Grants/proceeds to recycle
1,190
50
1,240
1,090
14
1
15
11
Grants/proceeds recycled
(196)
-
(196)
(1,173)
At 31 March
3,083
298
3,381
2,322
-
-
-
-
3,083
298
3,381
2,322
3,083
298
3,381
2,322
2015 £
2014 £ Restated
At 1 April
8
8
Issued in the year
1
-
At 31 March
9
8
Interest
Analysed as Due within 1 year Due in more than 1 year
The Association recycled £196,000 in the year coupled with social housing grant to fund 31 rented units, which were still in development at the year-end.
22.
Called up share capital (Association)
Shares of £1 each issued and fully paid
P a g e | 54
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements
23.
Reserves
Total reserves £’000
Revenue reserves £’000
Designated reserves £’000
Restricted reserves £’000
At 1 April 2014
47,905
3,171
870
51,946
Surplus for the year
17,894
-
-
17,894
(922)
-
-
(922)
488
(260)
(228)
-
65,365
2,911
642
68,918
Group Cost or valuation
Actuarial loss Reserve transfers At 31 March 2015
Association
At 1 April 2014
Revenue reserves £’000 (4)
Surplus for the year
(11)
At 31 March 2015
(15)
P a g e | 55
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements
24.
Designated reserves (Group)
At 1 April 2014
Furniture and equipment £’000 23
Tenants welfare £’000
Major repairs £’000
2015 £’000
10
3,138
3,171
-
(10)
(250)
(260)
23
-
2,888
2,911
Transfer to income and expenditure account At 31 March 2015
25.
Notes to the cash-flow statement
a. Reconciliation of operating surplus to net cash inflow from operating activities
2015 £’000
2014 £’000
22,779
20,814
4,693
4,420
55
65
(Increase)/decrease in properties for sale
(2,936)
(245)
(Increase)/decrease in debtors
(1,406)
225
Increase/(decrease) in creditors
(1,655)
295
23
70
21,553
25,644
Operating surplus Depreciation and amortisation Difference between pension charge and cash contribution
Share of joint venture surplus Net cash inflow from operating activities
P a g e | 56
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements b. Reconciliation of net cash inflow to movement in net debt
2015 £’000
2014 £’000
26,520
4,814
Change in net debt resulting from cash flows
(44,019)
2,233
Change in net debt
(17,499)
7,047
At 1 April
(169,899)
(176,946)
At 31 March
(187,398)
(169,899)
1 April 2014 £’000
Cash flows £’000
31 March 2015 £’000
12,690
26,520
39,210
Debt due within one year
(20,240)
18,694
(1,546)
Debt due after one year
(162,349)
(62,713)
(225,062)
(169,899)
(17,499)
(187,398)
Increase/(decrease) in cash in the year
c. Analysis of changes in net debt
Cash investments
P a g e | 57
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements
26.
Capital commitments (Group) 2015 £’000
2014 £’000
Capital expenditure that has been contracted for but has not been provided for in the Financial Statements
42,489
76,010
Capital expenditure that has been authorised by the boards of the subsidiaries but has not been contracted for
100,048
112,833
The amount contracted for as at 31 March 2015 will be funded from cash resources, grants approved by the Homes and Communities Agency and undrawn loan facilities.
27.
VAT Shelter: stock transfer obligations (Group) Immediately prior to entering into a Stock Transfer Agreement between Chorley Borough Council (the Council) and Chorley Community Housing (CCH), the Council contracted with CCH to perform the refurbishment works required to bring the CCH properties to be transferred into an agreed state. At the date of transfer the contract was for an estimated sum equal to the expected cost of the works i.e. £58.3m, (net of VAT). At transfer CCH contracted with the Council to acquire the benefit of the agreed refurbishment works (£58.3m net of VAT- estimated at the date of transfer) plus the housing properties at a price equal to the agreed value of the properties in their unenhanced condition (£2.2m). The nature of the works has been specified in a development agreement and a right of set off exists between the contracts. These contracts have enabled CCH to recover VAT on improvement costs that would otherwise have been expensed. At the time of the transfer CCH paid over a net cash amount of £2.2m to the Council, representing the acquisition of the properties in their unenhanced condition (£2.2m) plus the value of the Council’s obligation to carry out the refurbishment works (£58.3m net of VATestimated at the date of transfer), less any amount due to be incurred by CCH under the development agreement in relation to the anticipated cost of the improvements (£58.3m, net of VAT).
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The impact of these two transactions is that whilst the Council has a legal obligation to CCH to complete the refurbishment works, this work has been contracted back to CCH who are also legally obliged. The underlying substance of the transaction is therefore that CCH has acquired the properties in their existing condition at their agreed value, and will complete certain improvements in line with guarantees to tenants. In the opinion of the board, the commercial effect of these transactions when viewed as a whole does not, in practice, create separate assets and liabilities for reporting purposes. Therefore, in accordance with FRS 25 the resulting debit and credit balances, relating to the legal obligation of the Council to complete the refurbishment works for the Association and the equal and opposite legal obligation of CCH to perform the improvement works for the Council, have been offset and are not recorded in the balance sheet. As at 31 March 2015 improvement works to the value of £38.1m have been completed since transfer, net of £5.49m VAT shelter agreement receipts (2014: £38.1m net of £5.49m VAT shelter agreement receipts).
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements
28.
Pensions (Group and Association)
a. Social Housing Pension Scheme (SHPS) Adactus Housing Group participates in the Social Housing Pension Scheme (SHPS) defined benefit scheme. SHPS is funded and is contracted out of the state scheme. SHPS is a multi-employer defined benefit scheme. Employer participation in SHPS is subject to adherence with the employer responsibilities and obligations as set out in the “SHPS House Policies and Rules Employer Guide”. The defined benefit scheme was closed to new entrants on 31st December 2009. A defined contribution benefit structure was made available from 1 October 2010. The scheme operated a single benefit structure, final salary with a 1/60th accrual rate until 31 March 2007. From April 2007 there are three benefit structures available, namely: Final salary with a 1/60th accrual rate. Final salary with a 1/70th accrual rate. Career average re-valued earnings (CARE) with a 1/60th accrual rate. From April 2010 there are a further two benefit structures available, namely: Final salary with a 1/80th accrual rate. Career average re-valued earnings (CARE) with a 1/80th accrual rate. An employer can elect to operate different benefit structures for their active members (as at the first day of April in any given year) and their new entrants. An employer can only operate one open benefit structure at any one time. An open benefit structure is one which new entrants are able to join. The Group has elected to operate the final salary with a 1/60th accrual rate, benefit structure for all members in the defined benefit scheme.
From 1 April 2010 the requirement for employers to pay at least 50% of the total contribution rate no longer applies. The actuarial valuation assesses whether the scheme’s assets at the valuation date are likely to be sufficient to pay the pension benefits accrued by members as at the valuation date. Asset values are calculated by reference to market levels. Accrued pension benefits are valued by discounting expected future benefit payments using a discount rate calculated by reference to the expected future investment returns. During the accounting period, the Group paid contributions at the rate of 11.4%. Member contributions varied between 6.4% and 8.4% depending on their age. As at the balance sheet date there were 119 active members of the scheme employed by the Group. In the year to 31 March 2015, the Group made £1,158,110 of employer contributions to the scheme. It is not possible in the normal course of events to identify on a consistent and reasonable basis the share of underlying assets and liabilities belonging to individual participating employers. The scheme is a multi-employer scheme where the assets are co-mingled for investment purposes, and benefits are paid from total scheme assets. Accordingly, due to the nature of the scheme, the accounting charge for the period under FRS17 represents the employer contribution payable. The last formal valuation of the scheme was performed as at 30 September 2011 by a professionally qualified actuary using the Projected Unit Method. The market value of the scheme’s assets at the valuation date was £2,062m. The valuation revealed a shortfall of assets compared with the value of liabilities of £1,035m, equivalent to a past service funding level of 67.0%. The Scheme Actuary is currently finalising the 2014 valuation but key provisional results have been confirmed. As at 30 September 2014, the market value of the Scheme’s assets was £3,123 million. There was a shortfall of assets compared with the value of liabilities of £1,323 million, equivalent to a past service funding level of 70%.
The trustee commissions an actuarial valuation of the scheme every 3 years. The main purpose of the valuation is to determine the financial position of the scheme in order to determine the level of future contributions required, in respect of each benefit structure, so that the scheme can meet its pension obligations as they fall due. From April 2007 the split of the total contribution rate between member and employer is set at individual employer level, subject to the employer paying no less than 50% of the total contribution rate. P a g e | 59
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements The financial assumptions underlying the valuation as at 30 September 2011 were as follows: % pa
Valuation discount rates: Pre-retirement
7.0
Non-pensioner post retirement
4.2
Pensioner post-retirement
4.2 2.5 per annum for 3 years, then 4.4
Pensionable earnings growth
2.9
Price inflation Pension increases: Pre 88 GMP
0.0
Post 88 GMP
2.0
Excess over GMP
2.4
Expenses for death in service insurance, administration and PPF levy are included in the contribution rate. The valuation was carried out using the following demographic assumptions: Mortality pre retirement – 41% SAPS S1 Male / Female All Pensioners (amounts), Year of Birth, CMI_2009 projections with long term improvement rates of 1.5% p.a. for males and 1.25% p.a. for females.
Mortality post retirement – 97% SAPS S1 Male / Female All Pensioners (amounts), Year of Birth, CMI_2009 projections with long term improvement rates of 1.5% p.a. for males and 1.25% p.a. for females. The long-term joint contribution rates that will apply from April 2013 required from employers and members to meet the cost of future benefit accrual were assessed at:
Long-term joint contribution rate (% of pensionable salaries)
Benefit structure Final salary with a 1/60th accrual rate
19.4
Final salary with a 1/70th accrual rate
16.9
Career average re-valued earnings (CARE) with a 1/60th accrual rate
18.1
Final salary with a 1/80th accrual rate
14.8
Career average re-valued earnings (CARE) with a 1/80th accrual rate
14.0
Career average re-valued earnings (CARE) with a 1/120th accrual rate
9.7
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements If an actuarial valuation reveals a shortfall of assets compared to liabilities the trustee must prepare a Recovery Plan setting out the steps to be taken to make up the shortfall.
Following consideration of the results of the actuarial valuation it was agreed that the shortfall of £1,035m would be dealt with by the payment of deficit contributions as shown in the table below:
From 1 April 2013 to 30 September 2020
A cash amount(*) equivalent to 7.5% of members’ earnings per annum (payable monthly and increasing by 4.7% per annum each 1 April)
From 1 October 2020 to 30 September 2023
A cash amount(*) equivalent to 3.1% of members’ earnings per annum (payable monthly and increasing by 4.7% per annum each 1 April)
From 1 April 2013 to 30 September 2026
£30,640,000 per annum (payable monthly and increasing by 3% per annum each 1 April; first increase on 1 April 2014)
(*) The contributions of 7.5% will be expressed in nominal pound terms (for each employer), increasing each year in line with the Earnings growth assumption used in the 30 September 2008 valuation (i.e. 4.7% per annum). The contributions of 3.1% will be calculated by proportioning the nominal pound payment at the time of the change. Earnings at 30 September 2008 (for each employer) will be used as the reference point for calculating these contributions. These deficit contributions are in addition to the long-term joint contribution rates as set out above. Employers that participate in the scheme on a noncontributory basis pay a joint contribution rate (i.e. a combined employer and employee rate). Employers that have closed the defined benefit section of the scheme to new entrants are required to pay an additional employer contribution loading of 2.5% to reflect the higher costs of a closed arrangement. A small number of employers are required to contribute at a different rate to reflect the amortisation of a surplus or deficit on the transfer of assets and past service liabilities from another pension scheme into SHPS.
New employers that do not transfer any past service liabilities to the scheme pay contributions at the on-going future service contribution rate. This rate is reviewed at each valuation and new employers joining the scheme between valuations up until 1 April 2010 do not contribute towards the deficit until two valuations have been completed after their date of joining. New employers joining the scheme after 1 April 2010 will be liable for past service deficit contributions from the valuation following joining. Contribution rates are changed on the 1 April that falls 18 months after the valuation date. A copy of the Recovery Plan, setting out the level of deficit contributions payable and the period for which they will be payable, must be sent to The Pensions Regulator. The Regulator has the power under Part 3 of the Pensions Act 2004 to issue scheme funding directions where it believes that the actuarial valuation assumptions and/or Recovery Plan are inappropriate. For example the Regulator could require that the trustee strengthens the actuarial assumptions (which would increase the scheme liabilities and hence impact on the Recovery Plan) or impose a schedule of contributions on the scheme (which would effectively amend the terms of the Recovery Plan). As a result of pension scheme legislation there is a potential debt on the employer that could be levied by the trustee of the scheme. The debt is due in the event of the employer ceasing to participate in the scheme or the scheme winding up.
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements The debt for the scheme as a whole is calculated by comparing the liabilities for the scheme (calculated on a buy-out basis i.e. the cost of securing benefits by purchasing annuity policies from an insurer, plus an allowance for expenses) with the assets of the scheme. If the liabilities exceed assets there is a buy-out debt.
The market value of the GMPF’s assets at the last valuation date was £12,590m. The valuation revealed a deficit of assets compared to liabilities of £1,317m.
The leaving employer’s share of the buy-out debt is the proportion of the scheme’s liability attributable to employment with the leaving employer compared to the total amount of the scheme’s liabilities (relating to employment with all the currently participating employers). The leaving employer’s debt therefore includes a share of any ‘orphan’ liabilities in respect of previously participating employers.
The employers’ contributions to the GMPF by the Group for the year ended 31 March 2015 were £33,000 (2014: £29,000).
The amount of the debt therefore depends on many factors including total scheme liabilities, scheme investment performance, the liabilities in respect of current and former employees of the employer, financial conditions at the time of the cessation event and the insurance buy-out market. The amounts of debt can therefore be volatile over time.
Financial assumptions
The Group has been notified by The Pensions Trust of the estimated employer debt on withdrawal from the Social Housing Pension Scheme, based on the financial position of the scheme as at 30 September 2014. At this date the estimated employer debt for the Group was £45.8m, and £14.7m for the Association.
b. Pension - Greater Manchester Pension Fund (GMPF) Adactus Housing Association Limited participates in the Greater Manchester Pension Fund (GMPF). GMPF is a multi-employer defined benefit scheme under the regulations governing the Local Government Pension Scheme. This scheme is funded and is contracted out of the state scheme. There is an actuarial valuation of the GMPF every 3 years. The main purpose of the valuation is to determine the financial position of the GMPF in order to determine the level of future contributions required so that the GMPF can meet its pension obligations as they fall due. The last formal valuation of the GMPF was performed at 31 March 2013 by a professionally qualified actuary using the Projected Unit Method.
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The Group paid contributions at the rate of 17.5% (2014: 16.6%) during the year to 31 March 2015. Member contributions varied between 5.9% and 6.5 %.
The major assumptions used by the actuary in assessing scheme liabilities for FRS 17 purposes as at 31 March 2015 were as follows:
31 March 2015
31 March 2014
% per annum
% per annum
Discount rate
3.2
4.3
Expected Return on assets
3.2
5.9
Future salary increase
2.4
3.6
Future pension increases
2.4
2.8
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements Mortality assumptions The assumed life expectations on retirement at age 65 are:
2015 Number of years
2014 Number of years
Males
21.4
21.4
Females
24.0
24.0
Males
24.0
24.0
Females
26.6
26.6
Retiring today:
Retiring in 20 years:
Expected return on assets The expected returns on assets are:
Expected return on assets at: 2015 % pa
2014 % pa
2013 % pa
Equities
3.2*
6.6
5.7
Bonds
3.2*
3.8
3.5
Property
3.2*
4.8
3.9
Cash
3.2*
3.7
3.0
* The expected rates of return are set equal to the discount rate (as per the forthcoming FRS102 disclosure requirements)
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements Analysis of the amount charged to the income and expenditure account
2015 £’000
2014 £’000
Current service costs
40
36
Amounts charged to operating deficit
40
36
2015 £’000
2014 £’000
(95)
(76)
97
87
2
11
187
118
2015 £’000
2014 £’000
(80)
(204)
(608)
(528)
Expected return on scheme assets Interest on scheme liabilities Amounts credited to other finance income Actual return on scheme assets
Statement of total recognised surplus and deficits
Actuarial loss in pension scheme recognised in STRSD Cumulative actuarial loss recognised in STRSD
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements Amounts recognised in the balance sheet
2015 £’000
2014 £’000
(2,531)
(2,260)
Fair value of scheme assets (bid value)
1,796
1,614
Net liability recognised in balance sheet
(735)
(646)
2015 £’000
2014 £’000
(646)
(424)
(40)
(36)
-
-
Contribution by employer
33
29
Net interest income
(2)
(11)
(80)
(204)
(735)
(646)
Present value of funded obligation
Reconciliation of deficit
Opening scheme liabilities Current service cost Past service gain
Actuarial loss
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements Reconciliation of opening and closing balances of the present value of scheme liabilities
2015 £’000
2014 £’000
(2,260)
(1,929)
(40)
(36)
-
-
Contribution by employer
(12)
(11)
Interest cost
(97)
(87)
Actuarial loss
(172)
(246)
Benefits paid
50
49
(2,531)
(2,260)
2015 £’000
2014 £’000
1,614
1,505
Expected return on scheme assets
95
76
Actuarial gains
92
42
Contribution by employer
33
29
Contribution by employee
12
11
(50)
(49)
1,796
1,614
Opening scheme liabilities Current service cost Past service gain
Closing scheme liabilities
Reconciliation of opening and closing balances of the fair value of scheme assets
Opening fair value on scheme assets
Benefits paid Closing fair value of scheme assets
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements Major categories of plan assets as a percentage of total plan assets
2015 £’000
2014 £’000
Equities
73
72
Bonds
17
17
Properties
6
6
Cash
4
5
Amounts for the current and previous four accounting periods 2015 £’000
2014 £’000
2013 £’000
2012 £’000
2011 £’000
(2,531)
(2,260)
(1,929)
(1,651)
(1,580)
Fair value of scheme assets
1,796
1,614
1,505
1,338
1,357
Deficit on scheme
(735)
(646)
(424)
(313)
(223)
Experience adjustment on plan liabilities
19
(121)
1
(9)
107
Experience adjustment on plan assets
92
42
118
(68)
(183)
Present value of scheme liabilities
c.
Lancashire County Pension Fund (LCPF)
Chorley Community Housing Limited participates in the Lancashire County Pension Fund (LCPF). The LCPF is a multi-employer defined benefit scheme under the regulations governing the Local Government Pension Scheme. This scheme is funded and is contracted out of the state scheme. There is an actuarial valuation of the LCPF every 3 years. The main purpose of the valuation is to determine the financial position of the LCPF in order to determine the level of future contributions required so that the LCPF can meet its pension obligations as they fall due.
The last formal valuation of the LCPF was performed at 31 March 2013 by a professionally qualified actuary using the Projected Unit Method. The market value of the LCPF’s assets at the last valuation date was £5,011m. The valuation revealed a deficit of assets compared to liabilities of £1,377m. The employer’s contributions to the LCPF by Chorley Community Housing Limited for the year ended 31 March 2015 were £124,750 (2014: £122,327). The employer’s contribution for the year to 31 March 2015 was 14.1% (2014: 14.1%).
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements The major assumptions used by the actuary in assessing scheme liabilities for FRS 17 purposes as at 31 March 2015 were as follows:
Financial assumptions 31st March 2015 % pa
31st March 2014 % pa
Rate of CPI inflation
2.0
2.4
Discount rate
3.3
4.5
Future salary increases
2.0
3.3
Future pension increases
2.0
2.4
2015 No. of years
2014 No. of years
Males
22.9
22.8
Females
25.4
25.3
Males
25.1
25.0
Females
27.8
27.7
Mortality assumptions The assumed life expectations on retirement at age 65 are:
Retiring today:
Retiring in 20 years:
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements Expected return on assets The expected returns on assets are: Expected returns on assets at: 2015 % pa
2014 % pa
Equities
6.5
7.0
Government bonds
2.2
3.4
Other bonds
2.9
4.3
Property
5.9
6.2
Cash
0.5
0.5
Other
6.5
7.0
0.16
0.16
Investment expenses
Analysis of the amount charged to the income and expenditure account 2015 £’000
2014 £’000
173
182
Past service gain
-
-
Curtailments
-
-
173
182
2015 £’000
2014 £’000
(590)
(521)
481
428
Amounts credited to other finance costs
(109)
(93)
Actual return on scheme assets
1,203
382
Current service cost
Amounts charged to operating surplus
Expected return on scheme assets Interest on scheme liabilities
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements Statement of total recognised surpluses and deficits 2015 £’000
2014 £’000
(842)
(410)
(1,201)
(359)
2015 £’000
2014 £’000
(12,650)
(10,672)
Fair value of scheme assets (bid value)
10,751
9,554
Present value of unfunded obligations
(1,899)
(1,118)
Unrecognised past service cost
-
-
Related deferred tax asset
-
-
(1,899)
(1,118)
2015 £’000
2014 £’000
(1,118)
(743)
(173)
(182)
Past service gain
-
-
Curtailments
-
-
Contributions by employer
125
124
Net interest income
109
93
(842)
(410)
(1,899)
(1,118)
Actuarial loss in pension scheme recognised in STRSD Cumulative actuarial loss recognised in STRSD
Amounts recognised in the balance sheet Net pension liability at 31 March
Present value of funded obligation
Net liability
Reconciliation of deficit
Opening scheme (liabilities) Current service cost
Actuarial loss Closing scheme deficit
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements Reconciliation of opening and closing balances of the present value of scheme liabilities
2015 £’000
2014 £’000
(10,672)
(10,151)
(173)
(182)
-
-
(59)
(58)
(481)
(428)
Actuarial gains/(losses)
(1,455)
1
Benefits/transfers paid
190
146
(12,650)
(10,672)
2015 £’000
2014 £’000
9,554
9,408
Expected return on scheme assets
590
521
Actuarial gains/(losses)
613
(411)
Contributions by employer
125
124
Contributions by employee
59
58
(190)
(146)
10,751
9,554
Opening scheme (liabilities) Current service cost Curtailments Contributions by employee Interest cost
Closing scheme liabilities
Reconciliation of opening and closing balances of the fair value of scheme assets
Opening fair value of scheme assets
Benefits paid Closing fair value of scheme assets
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements Major categories of plan assets
2015 £’000
2015 %
2014 £’000
2014 %
5,300
49.3
5,007
52.4
Government bonds
333
3.1
296
3.1
Other bonds
151
1.4
879
9.2
1,086
10.1
831
8.7
516
4.8
162
1.7
Other
3,365
31.3
2,379
24.9
Total
10,751
Equities
Properties Cash
9,554
Budgeting figures for next year £’000 Projected service cost for next year
49.3
Projected expected return on assets for next year
3.1
Projected interest cost for next year
1.4
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
Notes to the financial statements
29.
Related parties
During 2014/15 there was one tenant member of the board, P Joyce. His tenancy with CCH was on normal social housing terms and he is unable to use his position to his advantage.
30.
Group structure
Adactus Housing Group Limited was registered with the Financial Services Authority on 26 June 2002. The Group Structure contains:
Adactus Housing Group Limited - a non-charitable parent organisation and registered provider of social housing Adactus Housing Association Limited - a charitable registered provider of social housing Beech Housing Association Limited - a non-charitable registered provider of social housing Chorley Community Housing Limited - a charitable registered provider of social housing Acuna Limited - a private company limited by shares Palatine Contracts Limited - a private company limited by shares.
The Association provides core administration, finance, development, management and maintenance services for each of the Group's subsidiaries. All transactions are recharged from the Association under a management agreement at an agreed return on cost. The board of Adactus Housing Association Limited are trustees of the James Tomkinson Memorial Cottages Trust. In addition, at 31 March 2014, the group chief executive and the group director of finance were directors of Renaissance Miles Platting Limited. This consortium was created to manage the Private Finance Initiative contract with Manchester City Council at Miles Platting.
31.
Operating leases
Operating lease payments amounting to £539,000 (2014: £780,000) are due within one year. The leases to which these amounts relate expire as follows:
2015
2014
Land and buildings £’000
Other £’000
Land and buildings £’000
Other £’000 Restated
In one year or less
52
57
-
255
Between one and five years
91
254
160
254
In five years or more
85
-
111
-
228
311
271
509
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Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
32.
Post-balance sheet event
In the July 2015 budget statement, the Chancellor of the Exchequer announced a new formula for the calculation of the annual increase to social housing rent. As from April 2016 the agreed annual rent increase of CPI +1% will be replaced by a rent reduction of 1% per annum for the four years to 2020 and that the CPI+1% formula will be reintroduced as from April 2020. As a result, the Group has revised its on-going financial plan and can report that due to the success of the efficiency measures that it has implemented group-wide over the past six years, the impact of the reduced rental income is more than accommodated within the Group’s forecast retained surplus. The revised financial plan has also been subjected to robust stress testing, which demonstrates the continued financial strength of the Group.
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The Group’s asset and liability register reports in excess of 1,200 unencumbered units group-wide, which should prove more than sufficient to support additional finance where required. Therefore the Group can report that it is able to continue to undertake all activities, including its development programme, at levels proposed in its previous financial plan and consequently no remedial action to its strategic plan is required.
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2015
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